Top 9 Best Asset Protection Strategies For Business Owners
You will agree with me all right that nobody ever files a lawsuit against a street urchin. Why? Of course, he has nothing to offer. But if you have a large investment or business, you sure are a target to asset scavengers. Creditors will find a way to shovel off some chunk of what you own if you do not secure them.
Asset protection is a legal process that secures your business, assets, and investment against liabilities, creditors, and other kinds of threats. Acquiring wealth is good, but if it’s not protected, you could lose it all.
While there are many strategies you can employ to protect your assets, here are some options to consider.
There is a huge need for you to think about your personal affairs especially now that there are more and more people starting up as entrepreneurs.
When you first startup, you tend to think about securing and achieving business growth. That’s brilliant, however, this can lead you to forget about protecting your assets and family.
So, if you’re starting to succeed as an entrepreneur, but haven’t sorted your assets, have a look at these top asset protection tips:
1. Protect Your Assets Through Documentation
Nobody wants to think about a partnership failure or death, especially when you are first starting a business. However, it’s essential for you to get this sorted earlier rather than later.
This conversation is best to have when you are first starting up, so you can protect your personal position in writing. There is usually a provision for what happens with what share in different circumstances, including death.
It is very rare for things to be included about what happens after a divorce or death but it’s best to seek legal advice and agree on any terms with your spouse.
2. Prepare your will
To begin with, a basic will, coupled with an approach in the business documents, will be sufficient. You may be tempted to think this is enough, but once you hit £500,000 or more, you will likely need something more detailed.
The best thing to do is to review your will every five to seven years. This will ensure it still meets your needs and is efficient in terms of inheritance tax.
If your wealth has grown or your personal assets have changed, then an annual review may be needed.
3. Raise your insurance umbrella liability coverage higher
Call your insurance company and get them to increase the threshold limit on your policy in order to accommodate your new wealth (net worth).
4. Put assets in different portfolios
Running various businesses under one umbrella company creates baggage of liabilities. It puts all your investment under threat. Because they all fall under one parent name, one lawsuit against it is a lawsuit against all the other businesses attached to it. This can destroy all your years of hard work.
It therefore becomes imperative to separate your different assets into separate companies — your operating company’s business from other assets that power your company.
5. Use a trust account
You can protect your assets by putting them in a trust account, under the trustee’s care. The good thing about placing your assets under trust is that they are protected from lawsuits filed against your business.
In addition, you can mark your properties with distinct identities when they are confined in a trust account.
6. Discover state laws that can secure your assets
We sometimes get overrun by our creditors because we’re ignorant of some state laws that can protect our investments from them.
Therefore, if you want to secure your investment plus your retirement plan, gain insight and understanding of the laws that can guarantee that, and you’ll be safe.
7. Go for international asset protection plans
Using domestic or local asset protection plans can secure your investment and windfalls quite all right.
However, with international asset protection plans, the obstacles and bottlenecks are stronger.
It is also more difficult to navigate both by the creditor and the legal representative, because they will have to go beyond the jurisdiction of their country to contend for assets in another country. It is both exhausting and expensive.
8. Safeguard Assets For Your Children and spouse
If you want to put money away for your children or buy them property, then there are steps you can take to do these and make sure they stay in the family.
Have a look at holding things in trust for your children. You could consider lifetime gifts as a way to reduce your inheritance tax liability.
If your children are entering into a marriage, you may also want to agree with them that they enter a pre-nuptial or cohabitation agreement.
Thinking about a pre-nuptial agreement? Make sure there is some time ready to fit your individual circumstances. You can’t really follow a template for these, you need it to fit your needs now and in the future.
This is especially critical if you jointly own assets with your married spouse. If your spouse should file for a divorce, you may lose part of your property to them since you both own the assets.
9. Be Thorough
It’s completely normal for entrepreneurs to not always have these aspects of their lives in order, especially in the start-up stage.
Cash can be tight and spending money on things like solicitors to help protect your assets might not be on your mind.
However, you shouldn’t cut corners and leave yourself vulnerable. When it comes to legal documentation, you need to be thorough. Ensure you have it in place to protect your personal affairs.
Just as you acquire assets, set up investment portfolios and establish businesses, you should also make plans to secure what you have gathered to ensure the financial future of your family.
You wouldn’t want to sit by and watch creditors scavenge on the output of your years of labour. Therefore, consider these asset protection strategies and get secured. However, seek further legal and investment council before you move ahead.
This guide should help you to start thinking about your personal finances as an entrepreneur. Do you have anything else that could help? Please share them below.